Management Control Systems for J.I.T.: An Empirical Comparison of Japan and the U.S.

Author(s): Shirley J. Daniel and Wolf D. Reitsperger

Source: Journal of International Business Studies, Vol. 22, No. 4 (4th Qtr., 1991), pp. 603-617
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 MANAGEMENTCONTROL SYSTEMS FOR J.I.T.:
AN EMPIRICALCOMPARISONOF JAPAN AND THE U.S.

Shirley J. Daniel* and Wolf D. Reitsperger**

University of Hawaii
Abstract.Just-in-Timemanufacturing (JI.T.),an essentialcomponent
of the Japanese manufacturingmodel, is increasingly emulated
by western corporations.While J.I.T. has received considerable
conceptualand empiricalattention,suitable managementcontrol
systems, which are essential to successful implementation,have
been sorely neglected. This study provides large-scale empirical
evidence comparing management control systems as they relate
to J.I.T. in the U.S. and Japan.

INTRODUCTION
Scholarlyresearchfocusing on U.S. and Japanesemanufacturinghas pinpointed
distinct differences between manufacturingpractices in these countries (e.g.,
Hayes and Wheelwright [1984]; Kaplan [1983]). The differences have crys-
tallized mainly in the areas of quality management (e.g., Juran [1978];
Hayes [1981]; Garvin [1983]), inventory control (e.g., Abernathy, et al.
[1981]; Wheelwright [1981]; Schonberger [1982]) and the vigorous pursuit
of manufacturingflexibility (e.g., Cusumano [1988]; De Meyer, et al. [1987]).
While these areas are recognized as competitive dimensions of manufactur-
ing strategy (e.g., Buffa [1984]), issues dealing with their implementation
have been neglected by large-scale empirical studies. This is particularly
evident in the lack of empirical work concerning management control sys-
tems supporting the implementation of Japanese manufacturing strategies.

*Dr. Daniel receivedher Ph.D. fromOklahomaStateUniversity.She is Associate

Professorof Accountancyat the Universityof Hawaii.Presently,she is researching
to what extent managementaccountingcontrol systems in Japan,the U.S. and
Europeare adaptedto supportmanufacturing strategiesand improveperformance.
**Dr.Reitspergerreceivedhis Ph.D. fromthe LondonSchool of Economics.He is
Professorof InternationalBusiness at the Universityof Hawaii. Presently,he is
involved in a large-scalestudy of operationsstrategies,accountingfeedbackand
performancein the U.S., Japanand Europe.
We would like to acknowledge all the Japanese and American managers who participated in this study.
We are especially grateful to Mr. Yuichi Kurita of Fujitsu Limited, Mr. Isao Noishiki and Mr. Mitsuroh
Matsumoto of Matsushita Electric Industrial Co., Ltd., Mr. Kazuyuki Okunuki of Akiyama Aiseikan
Co., Ltd., and Dr. Sara Beckman of Hewlett Packard whose extensive help and gracious hospitality
were invaluable during our factory visits. We would also like to thank the University of Hawaii Pacific
Asian Management Institute and the KPMG Peat Marwick Foundation Research Opportunities in
International Business Information program for their support.

Received: September 1990; Revised: January 1991; Accepted: March 1991.

603
604 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1991

MANAGEMENTCONTROL SYSTEMS
Writers on strategy have frequently argued that budgetary control systems
that focus on the accomplishments of short-termbudgetary targets may be
counterproductive to a strategic focus serving the long-term competitive
viability of a company (e.g., Lorange, et al. [1986]; Richards [1978]; Roush,
et al. [1980]). Among the most forceful critics of short-term financial con-
trol is Hayes [1981], who sees the sole use of such measures as an abdication
of strategic responsibilities and a sellout of U.S. technological superiority
as a competitive weapon. Similarly, Donaldson and Lorsch [1983] point to
an incompatible time frame between achieving strategic objectives and the
customary financial planning cycle. It is, therefore, not surprising that
Kaplan [1983, 1984] and Howell and Soucy [1987] find traditional U.S.
management accounting practices unsuitable to meet the needs of modem
innovative manufacturing.In contrast, Hiromoto [1988] finds that Japanese
management control systems have been modified to reflect and promote
strategic objectives. It follows that innovative Japanese manufacturing
strategies such as Just-in-Time (J.I.T.) have been implemented by suitably
adjusting management control systems. Specific goals and performance
feedback are the core elements of such a system (e.g., Bimberg and Snodgrass
[1988:447]; Goold and Quinn [1990:43]). Some competitive dimensions of
manufacturing strategy, such as quality (e.g., Juran [1978]; Hayes [1981];
Reitsperger and Daniel [1990]), flexibility and inventory control (e.g.,
Schonberger [1982]; De Meyer, et al. [1987]; Cusumano [1988]) have been
subjected to considerable empirical scrutiny, while management control
systems, especially those that are crucial to the implementation of J.I.T.,
have received very little attention. The seriousness of this omission is am-
plified by the conceptual adoption of the Japanese manufacturingmodel by
large proportions of U.S. manufacturingmanagers [Reitsperger and Daniel
1990; De Meyer, et al. 1987]. Empirical studies focusing on management
control systems associated with the Japanese manufacturing model can
therefore make a major contribution to the understanding and successful
implementation of Japanese manufacturingstrategies.
Some pioneering research provides an appropriatebackdropfor our analysis.
Daley, et al. [1985] empirically examined attitudinal differences between
line managers and controllers in the U.S. and Japan in regard to budgeting
and control systems. Their findings revealed that common notions about
Japan, such as participation of workers in the budgeting process, or prefer-
ences for unit quantitiesover cost information,were not supportedby empirical
evidence (e.g., see Dilworth [1985]). Similarly, Birnberg and Snodgrass
[1988] found only limited support for some common cultural stereotypes
when analyzing the effect of culture on the informal and explicit nature of
control systems in twenty-two Japanese and U.S. firms. Thus, empirical data
hardlyreflect the common culturalstereotypesaboutJapanesemanagementand
their imprint on management control systems. On the contrary management
J.I.T. MANAGEMENTCONTROLSYSTEMS 605

controlsystems in Japanseem to be matchedto innovativemanufacturing

strategies.Daniel and Reitsperger[1992] found, for example, that quality
goals and feedbackare providedmore frequentlyin Japanthanin the U.S.
This indicatesthatcontrolsystems have been adaptedto supportthe incre-
mentalqualityimprovements thatarea prerequisite
for J.I.T.implementation.
Ourstudyexpandsthe empiricaldatabaseavailableon this topic by explor-
ing the use of managementcontrolsystems associatedwith the implemen-
tationof J.I.T.In the following section we presenta theoreticalframework
and hypothesesrelatedto this importantissue.

THEORETICALFRAMEWORKAND HYPOTHESES

Just-in-TimeProduction
Severalmodels are relevantin analyzingstrategicinformationprovisionin
manufacturing. J.I.T.has been creditedas a key strategiccomponentof the
successful Japanesemanufacturingmodel. The essence of J.I.T. manufac-
turingis the timely provisionof materials,componentsand subassemblies
as the need arises in the manufacturingprocess. Thus, each stage of pro-
ductionprovidesonly whatis neededat the next stage of the manufacturing
chain. Suppliesfrom outside the plant,for example,arrivejust in time to
be used at the right work station, supportingthe system's major goal of
continuallyimprovingasset and laborutilizationby minimizinginvestment
in plantand inventory.At the same time, inventoryreductionsexpose qual-
ity problemswhich may have lingeredundiscoveredin a traditionalsystem
where buffer inventoriesconceal these problems;thus, J.I.T. also plays a
majorinteractiverole in qualityimprovement[Schonberger1982]. Conse-
quently,inventoryreductions,the benchmarkof J.I.T.implementation,im-
pose a high degree of exposureto uncertaintyfrom within and outsidethe
organization,becauseJ.I.T.by definitionaims to decreaseslack resources,
therebyfosteringincreasinginterdependenciesamong work stations, sup-
pliers of productioninputs,and assemblersand markets.Uncertaintiesre-
lating to qualityconformance,supply interruptions, laborstrikesand other
unforeseen contingenciesalso contributeto the high risk of production
interruptionsin a J.I.T.environment.
The Just-in-Case(J.I.C.) strategy, in contrast,utilizes large inventories,
surplusmanpowerand capacityto deal with unforeseencontingenciesfrom
within and withoutthe organization.This approachcontrastssharplywith
the asset and labor minimizingapproachwhich is characteristicof J.I.T.
While J.I.C. is at the core of the competitivedisadvantagein qualityand
cost performanceassociatedwith the traditionalU.S. model of high volume
repetitive manufacturing,J.I.T. is characteristicof the highly successful
Japaneseapproach.
606 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1991

J.I. T. and the Information-ProcessingModel

Having drawn attention to some key characteristics differentiating J.I.T.,
which is representative of the Japanese model, and its contrasting J.I.C.
counterpart, which characterizes the traditional American approach (e.g.,
Schonberger[1982]; Abernathy[1981]; Aoki [1990]), we are now in a position
to discuss how these models shape information provision. Galbraith's
[1974] information-processing model is eminently suited to explore this
issue, since the relevant aspects of the model, as they apply to J.I.T. and
J.I.C., are related to compensatory measures that counterbalance uncer-
tainty. The model proposes that there are two approaches to dealing with
volatile environments. The first approach assures continuity in the produc-
tion process by the planned provision of slack resources like inventories and
manpower to decrease uncertainty and the need for coordination between
internal as well as external organizational units. The second approach relies
on informationas the key to adaptingto uncertainty,since broad and frequent
information provision across functions facilitates the timely adaptation and
coordination among decisionmakers [Galbraith 1974]. One can infer that in
a J.I.T. environment, where slack resources are drastically reduced, increas-
ing information flows are of critical importance to make successful coordi-
nation possible and to allow effective implementation of the strategy. The
need for more infornation under J.I.T. production is not only the result of
the lack of buffer and safety inventories but is also a consequence of the
continuous push to decrease all existing slack resources [Hayes, et. al 1988],
which in turn increases the risk of production interruptions.J.I.C., in con-
trast to J.I.T., promotes the use of slack resources to offset unforeseen
contingencies, making information provision less critical. We would there-
fore expect more extensive information provision in Japan, since J.I.T. is a
component of the Japanese manufacturingmodel.

Goal Setting and Feedbackfor J.I. T.

In addition to Galbraith's information-processing model, the literature on
strategic controls and goal setting and feedback is of relevance. The strategic
management literatureadvocates systems of control to monitor progress and
to assure strategy implementation (e.g., Govindarajan and Gupta [1985];
Hrebiniak and Joyce [1984]; Lorange, et al. [1986]). Strategic controls con-
sist of long-term objectives and budgetary control systems, which must be
operationalized by specific and consistent subobjectives. The control of
performance and progress is accomplished by monitoring performance feed-
back, providingsubobjectivesreflecting the firms strategicthrust,and focusing
managerial decisions to provide the basis for coordination of various groups
within an organization (e.g., Barnard [1938]; Sloan [1963]; Anthony
[1965]). The desired objectives should be precise and measurable to avoid
a lack of substance and specificity. In reference to this subject, Roush and
Ball [1980:6] note that a strategy that cannot be evaluated is not a viable
J.I.T. MANAGEMENT CONTROLSYSTEMS 607

strategy to begin with. Thus, goal setting and feedback information are keys
to strategy implementation, and have been widely recognized in Western
organizational literaturesas effective tools to achieve performance improve-
ment [Locke, et al. 1981].
Strategic controls are not only critical in the strategic planning process
[Lorange 1980], but are also relevant to motivation. Hofstede [1967], for
example, sees budgeting as a game to be won by managers, and recognizes
the importanceof budgetsas motivationaltools. Similarly,Goold and Campbell
[1987] refer to "goal stretching" as a stimulant of performance improve-
ment. The motivationalvalue of strategic controls is consistent with Dynamic
Manufacturing. This philosophy, which is a characteristic of the Japanese
manufacturingmodel [Hayes, et al. 1988] triggers continuous improvement
and learning. Learning and performance improvement have also been asso-
ciated in empirical studies with the use of goal setting and feedback in
Japanese companies (e.g., Cole [1983]; Reitsperger [1986]).

Hypotheses
The prevalence of J.I.T. strategies in Japanese manufacturing versus J.I.C.
strategies in U.S. manufacturing should be reflected in distinctly different
patterns of infornation provision. The reduction of slack resources, a bench-
mark of J.I.T., increases uncertaintyand makes the coordination of activities
more critical and difficult when such a strategy is pursued. Strategic control
systems designed to implement J.I.T. strategies must consequently provide
increased infornation regarding raw materials, work-in-process, buffer and
finished goods inventories and about other factors critical to coordination.
In contrast, slack resources like safety and buffer inventories in a J.I.C.
environment counterbalance uncertainty and decrease the need for coordi-
nation and information. These propositions are solidly grounded in the
strategy literature which recognizes that different strategies are charac-
terized by varying degrees of uncertainty (e.g., Miles and Snow [1987];
Thompson [1967]), requiring different and matching management control
systems for effective implementation [Govindarajan 1985; Hirst 1983].
J.I.T. and J.I.C. strategies, the core elements of the Japanese and U.S.
manufacturing models, should therefore be reflected in significantly differ-
ent patterns of information provision. Specifically:
Hi: Information relating to inventories should be more widely dis-
seminated in Japan than the U.S. since such information is crucial
to reducing inventories, and accommodating the increased coordi-
nation needed in a J.I.T. environment.
H2: Information should be provided more frequently in Japan than
the U.S., to avoid production interruptionsin the absence of safety
inventories.
Similarly, goal setting with the aim of decreasing slack resources and im-
proving flexibility should accompany information provision to reinforce the
608 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1991

focus on continuousinventoryreductions.Goal setting also motivatesand

focuses the efforts of managerson the subobjectivescriticalto the imple-
mentationof a J.I.T.strategy.Hence, the following hypothesis:
H3:A largerproportion of JapanesethanU.S. managersreceivespecific
performancegoals relatedto inventoryreductionsand flexibility.
Finally, in Japan'sdynamicmanufacturingenvironmentwe expect strong
correlationsbetweengoal andfeedbackprovisionsince combinedgoals and
feedbackinteractin a beneficialway to stimulateimprovementprocessesby
motivatingthe workforce[Locke,et al. 1981].Thusthe followinghypothesis:
H4: There will be a strongercorrelationbetween the provisionof
J.I.T.-relatedperformancegoals and feedbackin Japanthan in the
U.S., reflectingthe dynamicsof workingfor perfectionin production.

RESEARCH METHOD AND SAMPLE DESCRIPTION

Instrumentand Measures
The questionnairewas designedto gatherinformationconcerninggoal set-
ting andperformancefeedbackpracticesrelatedto inventoryreductionsand
flexibility improvements,the essence of J.I.Tproduction.
J.I.T.productionstrives for the timely provisionof materials,components
and subassembliesat each stage of productiononly as they are needed.As
slack resources are reduced, increasedinformationabout the remaining
inventoriesis requiredto coordinateactivities.To addressthe issue of in-
creasedinformationprovision,the questionnairespecificallysolicitedinfor-
mationaboutgoal settingand feedbackfor raw materials,work-in-process,
buffer (safety) inventoriesand finishedgoods inventories.
Besidesinventory severalothersubobjectives
reductions, arecrucialtoimplementing
a J.I.T.strategy.Set-uptime, machinedowntimeandlot size were included
as variablesthatareparticularly instrumentalin achievinginventoryreductions
andimprovingmanufacturing flexibility.Reductionsin set-uptime makeit
economicallyfeasibleto produceincreasinglysmallerlot sizes, thusdecreasing
inventorylevels, while at the sametime allowingflexibleresponsesto market
changes(e.g., Schonberger [1982];De Meyer,et al. [1987]).
Machinedowntimeis also an importantfactoraffectingJ.I.T.implementa-
tion, since machinebreakdownsor set-upsin the absenceof bufferor safety
inventorieswill cause productioninterruptions.Reducingmachinedown-
time, consequently,is essentialto avoidinghalts in the productionprocess
and in eliminatingsafety and bufferinventories.
Finally, J.I.T. promotesreductionsin lot sizes by decreasingin-process
inventoriesand improvingmanufacturingflexibility. Recognition of the
importanceof lot size reductionto J.I.T.implementationrequirescontinu-
ous monitoringof this variable.
J.I.T. MANAGEMENT CONTROLSYSTEMS 609

For each informationvariable, the respondentswere asked to indicate

whetherthey received targetson a regularbasis and how frequentlyper-
formancefigures were provided.Most items were listed in both unit and
cost terms.
Particularconcernwas shown for the problemsof communicatingthe in-
strumentto the Japaneserespondents.The instrumentwas first writtenin
Englishand then translatedinto Japaneseby a translatorfamiliarwith both
the languageand the researcharea. A translationback into English from
Japanesewas perfornedbefore the instrumentwas used. A comparisonof
the English version and the reversetranslationrevealedno significantdif-
ferences. The instrumentwas then reviewed for clarity by two English-
speakingJapanesemanagersbefore it was used.

Sampk Sekection
The Japanesecompanieswere selected from the Firstand Second Sections
of the Tokyo, Osaka and Nagoya stock exchanges and over-the-counter
tradedandunlistedcompanies.U.S. companieswere selectedfromStandard
and Poor's Corporation Directory. A packet of twenty questionnaires was
mailed to each selected companywith a cover letter explainingthe study
and requestingthat the questionnairesbe distributedto various levels of
manufacturingmanagers.Manufacturingmanagerswere defined as fore-
men, section managers,departmentheads,productionmanagersandfactory
managers.Top managers,such as factory managers,companypresidents
and vice-presidents,were also includedin the survey.
A totalof 1,468responsesfrommanagersin electronicsmanufacturing were
received, 679 from Japanand 789 from the U.S. The fifty Japaneseand
sixty-fourU.S. firns participatingrepresenta 24% responserate for Japan
and a 9% responserate for the U.S.

Factory Interviews
Planttoursand interviewsof cost accountantsandmanufacturingmanagers
wereconductedat Japanesefactoriesin thegreaterTokyo,OsakaandSapporo
areas.Factorytoursin the U.S. were conductedin the westernand eastern
states.The interviewsincludedfactorycost accountantsand manufacturing
managersin orderto provide the on-site experiencenecessaryfor proper
interpretationof the data.

FINDINGS

Inventoryand Flexibility-RelatedPerformanceFeedback
Reducingslack resourcesrequiresincreasinginformationto facilitatecoor-
dinationbetweenvariousfunctions.Hi predictsthatinventoryandflexibility
feedbackinformationwill be more widely disseminatedin Japanthan the
U.S.
610 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1991

Table 1 shows the proportion of Japanese and U.S. managers receiving

performance feedback at least monthly. The data provide convincing evi-
dence supporting Hi, since the chi-square statistics for all thirteen feedback
measures show significant differences between the U.S. and Japanese man-
agers, with more Japanese than U.S. managers receiving performance feed-
back for inventory and flexibility. Unit information is provided to more
managers in both countries than cost information. However, significantly
more Japanese than U.S. managers receive cost feedback for inventory and
flexibility. This is contrary to common propositions in the literature (e.g.,
Dilworth [1985]) suggesting that cost infornation is less importantin Japan
than the U.S.A. Our results give credence to Daley, et al. [1985], who found
more favorable attitudes among Japanese than U.S. managers in regard to
expressing budgets in monetary rather than unit terms. These authors offer
among several possible explanations that "the assertions in prior studies are
simply not valid" [Daley, et al. 1985:06]. Our study adds evidence that this
may indeed be the case.

Frequency of FeedbackProvision
While H1 focuses on the proportionsof Japanese and U.S. managers receiv-
ing performance feedback, H2 is concerned with the frequency with which
such feedback is provided, predicting more frequent feedback provision to
Japanese than U.S. managers.
Table 2 shows the means for each feedback item for the U.S. and Japan;
higher means indicate higher frequency of feedback. The data indicate that
for all thirteen inventory and flexibility measures feedback is provided more
frequently to Japanese than to U.S. managers. Ten of the thirteen measures
are significantly different, providing broad support for H2.
The data in Table 2 again contradict the common assertions of the literature
that cost accounting is not as important in Japan as in the U.S., since
Japanese managers receive not only operational unit information, but also
cost feedback more frequently than U.S. managers.

Inventoryand Flexibility-RelatedTargetsand Goals

Table 3 shows each of the inventory and flexibility measures and the per-
centage of managers from each country regularly receiving goals or targets
for them. Over twice as many Japanese than U.S. managers receive regular
targets or goals for raw materials, work-in-process, and buffer and finished
goods inventories. In Japan, 45% to 55% of the operating managers receive
targets for both inventory units and costs, versus 15% to 25% in the U.S.
These results indicate a Japanese focus on inventory reductions. Again,
goals are often given in monetary as well as in unit terms.
Goal setting to improve flexibility also appears to be more prevalent in
Japan than in the U.S. This is indicated by the two to four times greater
J.I.T. MANAGEMENTCONTROLSYSTEMS 611

TABLE 1
Proportions of U.S. and Japanese Managers
Receiving Inventory and Flexibility Feedback

Chi-
square (Prob.)

COSTOF SET-UP/CHG-OVER 17 31.91 (0.001)

TIME
SET-UP/CHG-OVER 33 45.63 (0.001)
8
COSTOF MACH.
DOWNTIME 15 21.59 (0.001)
MACH.DOWNTIME 36 23.33 (0.001)

LOTSIZE
AVERAGE 50 110.19 (0.001)
COSTOF FIN.GOODSINV. 54 75.74 (0.001)

FIN.GOODSINV.UNITS 59 31.52 (0.001)

COSTOF BUFFERINV. 33.44 (0.001)
BUFFERINV.UNITS 13.53 (0.001)

COSTOFW.I.P.INV. 60 148.32 (0.001)

43
W.I.P.INV.UNITS 60 41.53 (0.001)
COSTOF RAWMAT.INV. 52 73.94 (0.001)
RAWMAT.INV.UNITS 49 62.47 (0.001)
0% 20% 40% 60% 80%

* U.S.
* JAPAN

percentage of Japanese managers that receive targets for lot size, set-up time
and downtime. The finding is consistent with De Meyer, et al. [1987] who
found that flexibility is a higher strategic priority among Japanese than U.S.
manufacturers. Goal-setting practices throughout the management control
system reflect and support this strategic focus.
The chi-square statistics show significant differences at the .001 level for
each J.I.T.- flexibility goal-setting measure. We find, therefore, strong con-
firmation for H3.

Correlationof Goal Setting with FeedbackProvision

H4, the last of the hypotheses, deals with the correlation of goal setting with
feedback provision. Goal setting combined with performance feedback has
been widely recognized as an effective method for improving performance
[Locke, et al. 1981]. H4 predicted a stronger correlation between goal and
feedback provision in Japan than the U.S., reflecting an emphasis on organ-
izational improvementand learning,a hallmarkof the Japanesemanufacturing
model.
612 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1991

TABLE 2
Frequency of Inventory and Flexibility
Feedback Provided to U.S. and Japanese Managers

T-Statistic
Variables Japan* U.S.* (Prob.)
COST OF SET-UP/CHG-OVER 1.65 1.28 7.91
(0.0001)
SET-UPICHG-OVERTIME 2.11 1.71 5.91
(0.0001)
COST OF MACHINEDOWNTIME 1.6 1.3 6.04
(0.0001)
MACHINEDOWNTIME 2.23 1.93 3.81
(0.0001)
AVERAGELOTSIZE 2.37 1.89 6.87
(0.0001)
COST OF FINISHEDGOODS INVENTORY 2.29 1.86 7.91
(0.0001)
FINISHEDGOODS INVENTORYUNITS 2.46 2.4 0.92
(0.3583)
COST OF BUFFER INVENTORY 1.7 1.42 5.89
(0.0001)
BUFFER INVENTORYUNITS 1.83 1.73 1.59
(0.1124)
COST OF W.I.P. INVENTORY 2.39 1.82 10.66
(0.0001)
W.I.P. INVENTORY 2.48 2.44 0.62
(0.5358)
COST OF RAW MATERIAL
INVENTORY 2.22 1.83 7.32
(0.0001)
INVENTORYUNITS
RAW MATERIAL 2.22 1.9 5.19
(0.0001)
*Highermeans indicate more frequent feedback.

A glance at Table 4 confirms that goal provision is significantly correlated

with perfonnance feedback in both Japanand the U.S. on all of the measures
employed. The Spearman correlations are substantially higher in Japan than
in the U.S., however. This indicates that goals are more often combined
with feedback information in Japan, supporting hypothesis four (H4).
In summary, we find strong evidence of goal and performance feedback
provision to a significantly larger proportionof Japanese managers, a higher
frequency of performance feedback to Japanese managers, and stronger
correlations between goals and performance feedback in Japan than in the
U.S. This provides support for all of our hypotheses.

CONCLUSION
Our analysis indicates that Japanese manufacturershave designed manage-
ment accounting and control systems that reflect the requirements of J.I.T.
J.I.T. MANAGEMENT CONTROLSYSTEMS 613

TABLE3
Proportions of U.S. and Japanese Managers
Receiving Inventoryand FlexibilityGoals

Chi-
square (Prob.)

COSTOF SET-UPICHG-OVER 3 73.96 (0.001)

SET-UP/CHG-OVER
TIME 10 83.13 (0.001)
27
COSTOF MACH.
DOWNTIME 37.28 (0.001)
12
MACH.
DOWNTIME 12 80.34 (0.001)
30
LQTSIZE
AVERAGE 14 46 198.29 (0.001)

COSTOF FIN.GOODSINV. 47 176.29 (0.001)

FIN.GOODSINV.UNITS = _ 51 117.06 (0.001)

COSTOF BUFFERINV. 20 67.40 (0.001)

BUFFERINV.UNITS 25 52.38 (0.001)

COSTOF W.I.P.INV. 57 253.08 (0.001)

25
W.I.P.INV.UNITS 54 138.92 (0.001)

COSTOF RAWMAT.INV. 47 146.34 (0.001)

RAWMAT.INV.UNITS 44 144.37 (0.001)
0 20 40 60 80

* U.S.

* JAPAN

and flexibility strategies. This should come as no surprise, since these strate-
gies have been pioneered in Japan and widely accepted as core elements of
the Japanese manufacturing model (e.g., Schonberger [1982]). Our data
provide importantempiricalsupportfor previous case-specilficevidence of the
adaptationof managementcontrolsystems in Japanto suit the newly emerging
manufacturing strategies (e.g., Hiromoto [1988]; Cusumano [1988]).
The comparative U.S. and Japanese data show that management control
systems in the U.S. have not been adapted to ad;equatelyreflect the adoption
of the Japanese manufacturing model, even though many elements of this
model were found to have a widespread conceptual following in the United
States [Reitspergerand Daniel 1990]. Conceptualadoptionis only a preliminary
step to implementation and strategic intentions need to be designed into the
management control systems that are instruments of implementation. Our
factory visits in the United States reveal that the new manufacturingstrategies
that are often vigorously pursued by innovative line managers are frequently
constrained by a lack of interdisciplinary coordination or competence and
an unwillingness to adapt planning and control systems to the new needs
614 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTHQUARTER 1991

TABLE4
U.S. and Japan Electronics Managers Correlation
of Provision of Goals with InventoryFeedback

Spearman Correlations(Prob.)
Variables U.S. Japan
COSTOF SET-UP/CHG-OVER 0.41042 0.59527
(0.0001) (0.0001)
SET-UPICHG-OVER
TIME 0.45816 0.70659
(0.0001) (0.0001)
COSTOF MACHINE
DOWNTIME 0.4417 0.56382
(0.0001) (0.0001)
DOWNTIME
MACHINE 0.50521 0.70181
(0.0001) (0.0001)
AVERAGE
LOTSIZE 0.56189 0.73951
(0.0001) (0.0001)
COSTOF FINISHED
GOODSINVENTORY 0.52974 0.74514
(0.0001) (0.0001)
FINISHED UNITS
GOODSINVENTORY 0.54452 0.69511
(0.0001) (0.0001)
COSTOF BUFFERINVENTORY 0.48833 0.72216
(0.0001) (0.0001)
BUFFERINVENTORY
UNITS 0.54313 0.73701
(0.0001) (0.0001)
COSTOF W.I.P.INVENTORY 0.55665 0.79536
(0.0001) (0.0001)
W.I.P.INVENTORY 0.53147 0.74406
(0.0001) (0.0001)
COSTOF RAWMATERIAL
INVENTORY 0.58168 0.80717
(0.0001) (0.0001)
RAWMATERIAL
INVENTORY
UNITS 0.57304 0.79328
(0.0001) (0.0001)

created by adoption of the Japanese manufacturing model. Especially the

skill-specific isolation of management accountants seems to be a signiflcant
constraintin adjustingmanagementcontrol systems in the U.S. Our evidence
shows that progressive management accountants are scrambling for a "new
purpose" in a rapidly changing manufacturingenvironment,while tradition-
alists in the professiondesperatelyseek to maintainsystems that are incompat-
ible with the dynamism of the new manufacturingenvironment.
While U.S. professional isolationism inhibits the adjustmentof management
control systems it also raises broaderquestionsabout the capacity of organiza-
tions to cope with change. An emerging theory of the Japanese firm argues,
for example, that the provision and "participativeprocessing" of information
is crucially related to broader skill development and organizational adapt-
ability to change [Aoki 1986; 1990]. Broad skills (e.g., see Cole [1983];
Koike [1987]; Itoh [1987]), and information-processing capacities, when
combined with decentralized decision authority, are hallmarks of Japanese
J.I.T. MANAGEMENTCONTROLSYSTEMS 615

managementat its best. Ourstudy shows empiricallythat information,the

essential prerequisiteto learningand coordination,is provided to larger
proportionsof Japanesemanagersand in shortertime intervalsthan in the
U.S. Thuswe find empiricalsupportfor Aoki's "emergingmode" as being
prevalentin Japan,while thereare indicationsof a propensityto maintain
the "traditionalmode" in the U.S.
This impliesthatthe full implementationof the Japanesemodel in the U.S.
may pose a formidablechallenge.First,the specialistorientationof workers
and managersmay act as a structuralbarrierto the flexible coordination
requiredin the system. Secondly,the information-processing capabilitiesof
the workforcemay need to be developedby initial training.And last but
not least, infornationprovisionitself will need substantialrestructuringto
matchthe new strategiespursued.

LIMITATIONS AND SUGGESTIONSFOR FUTURE RESEARCH

Our research results are based on data from large U.S. and Japanese samples
of electronics manufacturersusing high volume repetitiveassembly processes.
The findings and conclusions of our research consequently need to be con-
sidered as industry and process specific. Future studies are needed to test
the general applicability of the presented results, by comparing management
controlsystems in a widerspectrumof industries.Studiesshouldalso focus
on the question of why intended strategic changes are not implemented in
the U.S. Especially the effects of specialist orientations, traditional manage-
mentaccountingpractices,andattitudesneed much'moreresearchattention
since they seem to be significant barriers to implementation of Japanese
manufacturing strategies such as J.I.T.
Our study assumed that Japanese manufacturershave adopted J.I.T. strate-
gies while U.S. manufacturers
apply J.I.C.managementmethods.This has
not yet been established by broad empirical support, and requires appropri-
ate caution in interpretingthe data. Future studies that specifically measure
manufacturingstrategiesand their link with controlsystems are needed to
confirmthat the patternsof informationprovisionfound in this study are
indeeda consequenceof the strategiesemployed.

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